Payments regulatory news, 21 May 2021

Contents

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• FSCS protection: FCA Dear CEO letter to e-money firms

FSCS protection: FCA Dear CEO letter to e-money firms

The UK Financial Conduct Authority (FCA) has published a Dear CEO letter sent to e-money firms, asking them to write to their customers to make it clear how their money is protected. The FCA is concerned that many e-money firms compare their services to traditional bank accounts or hold themselves out as an alternative in their financial promotions, but do not adequately disclose the differences in protections between e-money accounts and bank accounts. In particular, they do not make it clear that the Financial Services Compensation Scheme (FSCS) does not apply. The FCA is also concerned that firms are giving a potentially misleading impression to customers about the extent to which products or services are regulated by the FCA.

The FCA asks e-money firms to:

• write to customers within six weeks of 18 May 2021 to remind them of how their money is protected through safeguarding and that FSCS protection does not apply. This communication must be separate from any other messaging or promotional activity. Firms should consider the appropriate method(s) of communication based on their business model and customer base, including any vulnerable customers;
• review financial promotions in the light of the FCA Handbook rules and guidance in BCOBS 2.3.1AR and BCOBS 2.3.4G. In particular, firms must ensure that promotions give customers enough information and that where any promotion does name the FCA as regulator and refers to matters it does not regulate, it must make it clear that those matters are not regulated by the FCA; and
• bring the Dear CEO letter to the attention of the board. The FCA expects the board to have considered the issues raised in the letter and to have approved the action taken in response to it.

The FCA intends to follow up, with a sample of firms, to assess the action taken.

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Authored by Yvonne Clapham